The US dollar rallied slightly on Tuesday to reach towards the ¥115 level. This is an area that has been a major resistance barrier multiple times over the last several months, and I think is not a huge surprise to see that we have stopped here. Whether or not we get above here between now and the end of the year is a different question, and quite frankly I do not think it will. I think a pullback makes quite a bit of sense in order to build up enough momentum to finally break out. If and when we do, then the USD/JPY pair will be more of a buy-and-hold type of scenario.
To the downside, the ¥112.50 level is significant support, and I do not think that we will break down below there, at least not anytime soon. If we were to break down below that level, it could change everything but that would be more or less a “risk off” type of move, and I do not see that being a major threat. The grind that we have seen over the last couple of weeks makes sense, because the ¥115 level has been such a magnet. However, now that we are getting to the end of the year, I think we are simply going to kill some time until we can get through New Year’s Day and perhaps the jobs number.
Keep in mind this pair is highly sensitive to the employment report, so that might be what we need to see in order to make the bigger move. In fact, once we get through that jobs number, it could give us a bit of a heads up as to where we are going over the next several months. The pair certainly looks as if it wants to go higher, but we need to have more of a “risk on move” in general to continue finally break it out. The area around the 115 level has been very difficult to overcome, so we are going to really need to see the Japanese yen get sold off against everything in order to see this thing break out. Longer term, that could send this market looking towards the ¥120 level above, possibly even ¥125.
